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Income Tax Act, 1962 (Act No. 58 of 1962)

Department of Finance

Practice Note No. 28

Secondary Tax on Companies: Section 64C of the Income Tax Act: Certain Amounts Distributed Deemed to be Dividends: Employer Contributions to Employees' Pension, Provident and Medical Funds


Date: 19 August 1994


Section 64C(3) of the Income Tax Act (the Act) is very widely worded and could be interpreted so as to include within its ambit contributions made by a company to an employee's pension, provident or medical aid fund where the employee is also a "recipient" in relation to the company.


Section 64C(4)(b) of the Act provides that an amount will not be deemed to be a dividend distributed by a company where the distribution constitutes remuneration in the hands of the "recipient" thereof. The term "remuneration" used in section 64C(4)(b) is not the same as that defined in the Fourth Schedule to the Act since "remuneration" is defined in the Fourth Schedule for the purposes of that Schedule only, unless otherwise stated. Therefore, in the context of section 64C(4)(b) of the Act, the term "remuneration" is given its ordinary meaning and as such includes any payments which are in fact part of the employee's remuneration package. Employer contributions to employees' pension, provident and medical aid funds will accordingly not be deemed to be dividends declared by the company and will, therefore not cause the company to be subject to Secondary Tax on Companies in respect thereof.